Finance Minister Muhammad Aurangzeb has sought $1 billion in funding from the International Monetary Fund’s Resilience and Sustainability Trust (RST) to address the country’s climate risks and expedite its energy transition.

Pakistan’s power sector is grappling with a circular debt that exceeded Rs2.66 trillion ($9.5 billion) in May, as reported by the government’s power division.

The challenges have been attributed primarily to flawed capacity payment contracts with independent power producers (IPPs).

According to Energy Minister Awais Laghari, the government aims to reform the power sector by optimising IPP costs, evaluating fiscal burdens on consumers, and unbundling electricity to foster a competitive market, enhancing efficiency and lowering prices.

While emphasising the importance of renewable energy, the minister highlighted its potential to provide cheaper electricity which is critical for the success of a competitive market regime.

He went on to add that the government plans to privatise electricity distribution companies and improve governance to enhance operational efficiency and ensure more affordable prices for consumers.